Turkey in a new period: Challenges and opportunities

The Brookings Doha Center (BDC) hosted a panel discussion on October 21, 2018 to discuss the significance of the latest domestic and external developments for Turkey’s political and economic future. The panel addressed the following questions: What is the political and economic outlook for Turkey? What will be the nature of Turkey’s alliance structure and geopolitical identity down the road? How is the government addressing the fallout from the currency crisis? Where does Turkey’s economic future lie?

The panel included a group of distinguished experts including Ibrahim Turhan, former chairman and CEO of Istanbul Stock Exchange and deputy governor of Turkey’s Central Bank; Galip Dalay, nonresident fellow at the BDC and research director at Al Sharq Forum; and Taha Ozhan, former chairman of the Foreign Affairs Committee of the Turkish Parliament and research director at the Ankara Institute. Tarik Yousef, senior fellow and director of the BDC, moderated the event, which was attended by members of Doha’s diplomatic, academic, and media communities.

Tarik Yousef started the discussion by emphasizing the many political, geopolitical, economic, and social challenges that Turkey has faced. Turkey has suffered economic shocks affecting the lira. This has consequences for the health of the banking system, inflation, real estate development, and the overall economic outlook for the country. Turkey has also confronted obstacles accompanying the political transformation after constitutional reforms. Geopolitically, Turkey is experiencing challenges in Syria and in its relationship with states such as Iran, Russia, and the United States. Most recently, Turkey has been active in the case surrounding the late Jamal Khashoggi, a prominent Saudi journalist.

Ibrahim Turhan provided an economic overview of the situation in Turkey. He began by highlighting that Turkey has always been an integrated part of the global economic system and that placing Turkey within this global context is crucial. The Turkish economy is greatly impacted by what is going on in the world. He argued that the fundamental problem for Turkey is the lack of a necessary domestic savings base. He described how former rapid growth created a pressure on the Turkish economy resulting in inflation and dependence on foreign borrowing.

Turhan explained that since the end of September, there has been a significant change in the depreciation rate due to decreasing tensions in Turkish foreign relations. This change signaled that Turkey has begun to diverge from the rest of the emerging markets for the better. The Turkish lira recovered, and the Turkish markets have performed relatively better compared to other stock markets. He suggested deepening economic relations with the Middle East as a solution. However, he posited that it will not be an easy task in a region that is tied to international and intergovernmental relations. He concluded by remarking that, through managing foreign relations, Turkey can attract more foreign finance.

Taha Ozhan underlined the importance of understanding Turkey’s domestic politics in order to better grasp the economic challenges. He gave a brief history of the country’s past achievements and failures. He argued that, before 2002, Turkey had both a western and eastern side, meaning that one part was living in globalization, while the other remained rooted in the Cold War era. He continued by stating that, from 2002 until today, various issues have been raised and a plethora of labels have been applied in the literature, such as normalization pains, balancing civil-military relations, and balancing the regional role of Turkey.

Although Ozhan agreed with these labels, he remarked that he himself would try to put a different label on Turkey. He went on to explain the domestic, social, and economic circumstances that helped the rise of the Justice and Development Party, the ruling party in Turkey. He described the era from 2002 to 2007 as one of radical democratization. It marked a new era of stability after a number of coups d’états and the removal of what remained from the preceding era. He concluded that external events and dynamics, such as the Arab Spring, play an influential role in shaping Turkey’s domestic politics and foreign policy.

Galip Dalay approached the topic by dividing his remarks into several distinct categories of Turkish foreign relations, focusing specifically on the context and challenges of each. He expanded on Turkey’s relations with the United States, Russia, and the Middle East. Regarding Turkish-U.S relations, Dalay stated that a new framework had never been defined between the two countries after the end of the Cold war. This resulted in an accumulated sense of grievances and crises. Moreover, Turkish and American perceptions of threats in this region are divergent, which hinders their ability to cooperate more effectively. The quality and meaning of Turkey’s membership to NATO have also been adversely affected by this.

As for Russian-Turkish relations, it is all about pragmatism. Both countries are known to have directly opposing interests. This clash existed between the USSR and Turkey in the twentieth century and has persisted until today. Dalay stated that the future of Russian-Turkish relations is a very personal matter to both parties, but this relationship remains largely undefined, without a cohesive policy or framework to guide how Turkey and Russia will act henceforth. Finally, he discussed Turkey and the Middle East. Dalay touched upon the murder of Jamal Khashoggi, positing that it might be vital to the creation of a new political psychology, which will turn people against authoritarian regimes in the Middle East. Regarding Iran, he mentioned that Turkey will always remain suspicious of any Iranian ambitions for geopolitical expansion. Iran opposes Turkish foreign policy and its presence in Syria. However, the two countries seem to have the willingness to overcome this animosity and work together on issues such as trade and counterterrorism efforts in Iraq.

The subsequent question and answer session focused on the implications of these various political, geopolitical, and economic issues. For countries with sensitive geopolitical positions like Turkey, politics and economics go hand in hand. Therefore, it will be difficult to address economic challenges without understanding both domestic and regional politics. It is also necessary to create a framework that ensures Turkey’s national security. In general, the session drew attention to the fact that Turkey is on track in implementing the right measures to address its various economic challenges.